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CD CASES: The Economic Loss Rule is Still Alive!

Kenneth "Jayme" Idle | February 24, 2014

Last March, in Tiara Condominium Association, Inc. v. Marsh & McLennan Companies, Inc., 110 So. 3d 399 (Fla. 2013), the Florida Supreme Court issued an opinion that many thought would prevent the continued application of Florida’s long-standing Economic Loss Rule ("ELR") in construction defect ("CD") cases. Almost immediately after Tiara was published, the majority of plaintiffs’ HOA attorneys amended their pleadings to add counts for negligence. However, as CD cases weave their way through the local trial courts after Tiara, some Circuit Judges have breathed new life into the ELR.

As background, the ELR has prohibited most tort actions when the only damages suffered are economic losses. The rule prevents parties from circumventing the allocation of losses set forth in a contract by bringing a tort action as opposed to a breach of contract action. The rationale is that contract principles, as opposed to tort, are more suitable for determining remedies in a breach of contract action. However, Tiara held the ELR only applies in the context of products liability cases. As a result of Tiara, many thought the application of the ELR in CD cases was dead.

Fortunately, some crafty lawyers have persuaded some Circuit Judges to continue the application of the ELR in CD cases with a rather simple argument: buildings are completed products and the ELR still applies to products liability cases.

For example, in May 2013, Circuit Judge Thomas Mihok, whom presides in Orange County, issued an order granting a contractor’s motion for summary judgment finding the ELR precludes the plaintiff condominium association "from bringing a tort because the only damages it suffered are to the homes, that is, the products themselves…[W]ithout an accompanying personal injury or injury to other property, a negligence claim cannot stand." Central Park LV Condominium Association, Inc. v. Summit Contractors, No. 2010-CA-015748-O (Fla. 9th Cir. Ct. May 24, 2013).

Additionally, in September 2013, Circuit Judge Scott Polodna, whom presides in Osceola County, issued a similar order indicating the same products liability rationale. The Judge noted the condominium association’s complaint alleged the "defective conditions of [condominium] units have caused damage to other units within the Subject Property. However, the finished product is the entire structure, not the individual units. Therefore, the [ELR] still applies as no damage to any property other than to itself was alleged…" Siena at Celebration Master Association, Inc. v. Winter Park Construction Co., No. 2009-CA-6474 (Fla. 9th Cir. Ct. Sept. 4, 2013).

Although the above orders indicate the ELR is still viable in CD cases, persistent plaintiffs’ counsel will inevitably challenge them at the appellate level. But at least for the time being, defense counsel should continue to use the ELR to attack tort claims in CD cases.



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